The NYC PTET is imposed on “New York City pass-through entity taxable income” at a flat rate of 3.876%. As we discussed here, the NYC PTET is an optional tax that certain entities may elect to pay with an effective date of January 1, 2022. The NYC PTET paid by partnerships or S corporations can be claimed as a credit against the New York State income tax liability of partners, members or shareholders.
An eligible city partnership is any partnership (including a LLC treated as a partnership for federal income tax purposes) that has elected to participate in the NYS PTET and: (1) has a filing requirement under Tax Law § 658(c)(1); (2) is not a publicly traded partnership; and (3) has at least one partner or member that is a city resident individual. Similarly, an eligible city resident S corporation is any New York S corporation (including an LLC treated as an S corporation for New York State and federal income tax purposes) as defined by Tax Law § 208.1-A that has elected to participate in the NYS PTET and: (1) is subject to the fixed dollar minimum tax under Tax Law § 209; and (2) has only city resident individual shareholders.
Importantly, the taxpayer must have opted in to the State’s Pass-Through Entity Tax (“NYS PTET”) by September 15, 2022. The deadline to make the election for tax year 2022 is March 15, 2023. Making the election is a simple process. In order to opt in, an eligible entity must use the online New York City Annual Election application, which is separate from the online application used to opt in to the NYS PTET. There are detailed instructions on the NYC PTET homepage. For tax years beginning January 1, 2023, an entity must elect to opt in to the NYC PTET and NYS PTET at the same time and via the same online application.
An entity electing to opt in to the NYC PTET is not required to make estimated tax payments for tax year 2022. This changes next year. For tax years beginning January 1, 2023, electing entities must make estimated tax payments on or before March 15, June 15, September 15, and December 15.
